Upstart Engine No. 1 Activist Takes GM Stake, Supports EV Transition Plan

Engine No. 1, the company that rose to prominence after running a successful campaign against Exxon, announced an investment in General Motors on Monday. This time, the stake of the upstart activist signals his support for the automaker in its transition to electric vehicles.

The No.1 engine pointed out the similarities between Exxon and GM, noting that every company is in an industry undergoing transformation. But GM, unlike Exxon, is taking concrete action in what the company sees as imperative for long-term success: linking ESG criteria to economic performance.

“GM, with the support of a really strong management team and a great board of directors, has decided that they are going to embrace the future. They are going to make the investments necessary to make this transition a success,” said Engine. No. The founder of .1 Chris James said Monday on CNBC’s “Squawk Box”.

In January, GM announced plans to offer electric vehicles exclusively by 2035, part of a larger plan to become carbon neutral by 2040. By 2025, the company plans to launch 30 new electric vehicles around the world as part of a $ 27 billion investment in electricity. and autonomous vehicles.

James said GM’s “all-in-one, two-foot-in” approach to adopting electric vehicles is rare for an incumbent and sets the automaker up for success. Rather than seeking to protect its historic business first and foremost, which is the typical approach, James said the company is embracing change.

Tesla focused on battery-electric vehicles from the start, and Wall Street rewarded the company for its leadership in the production of electric vehicles. The company’s market capitalization is well over $ 700 billion, according to FactSet, well ahead of GM’s valuation of $ 77.1 billion. But the latter delivers millions more cars each year than Tesla, and James noted that this scale advantage positions GM for future returns.

“We think this may become a growing business again… we think this stock could triple in the next five years, and that, for us, is something that excites us enough,” he said. “We believe that for the first time, they have the capacity to gain a huge market share.”

James said that with Exxon and GM, the goal is to focus on what’s best for the business in the long run. He avoids the description of “activist investor”, preferring to call himself an active owner.

Still, the company is emerging from a high-profile campaign against Exxon. The firm began targeting the oil giant in December 2020 with just 0.02% position. Engine No. 1 appointed its own roster of directors and, after months of back-and-forth, successfully placed three of its four nominees on the board.

“We’re not going hostile at all, we think they’re doing the right thing,” James said of GM. He added that CEO Mary Barra and the automaker’s entire management team were open to discussions about the company’s future and long-term goals.

“It was a real difference and it couldn’t have been more of a 180 than what we faced when we spoke to Exxon at the start,” he said.

GM shares have risen more than 30% for 2021 and have gained around 80% in the past year.